IPL 2014

IPL teams face hit in sponsor revenue

Nagraj Gollapudi

April 2, 2014

Comments: 29 | Text size: A | A

Gurunath Meiyappan with Mumbai Police after being arrested for his involvement in the IPL spot-fixing scandal, May 24, 2013
The corruption scandal and the uncertainty over the schedule are some of the reasons franchises are finding it hard to sign up sponsors © Hindustan Times
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Series/Tournaments: Pepsi Indian Premier League
Teams: India

With just two weeks left for the start of the IPL, many franchises are yet to finalise deals with sponsors. Kings XI Punjab, Delhi Daredevils, Sunrisers Hyderabad, Rajasthan Royals and Royal Challengers Bangalore are understood to be the five franchises that have been unable to close deals, including finding a front-chest sponsor, a valuable space where the brand is most prominently displayed on the shirt front.

Brand experts predicted a "tough year", claiming the franchises will suffer a deep cut of 20% in their sponsorship revenues, which will be exacerbated by the loss in ticket revenues as a result of the first phase of the tournament being played in the UAE.

Uncertainty over the venue for the second-half of the IPL, the economic slowdown, clash with the federal elections, and the controversies that have emanated from the corruption scandal during last year's IPL are factors that have affected sponsorships.

According to Mohit Burman, one of the Kings XI owners, as soon as the IPL announced the first 20 matches would be played in the UAE, sponsors sent a warning signal. "One of our sponsors, Lux Cozy, decided to not renew a three-year deal," Burman said. "They pulled out immediately. This year is sort of a mess. The uncertainty over the venues did hamper us. First they said it could be one of - or a combination of - South Africa, UAE and Bangladesh as the overseas venue due to the elections. Now we still do not know where the second part will be held. As it is, the market is soft, and due to the recent controversies it has had an impact on the franchise costs."

 
 
"The gate money would be reduced, the sponsorship would be reduced, there are fewer teams so the central revenue would be also be reduced" Mohit Burman, co-owner of Kings XI Punjab
 

Burman agreed that the overall revenues this season will be significantly lesser than previous seasons. "The gate money would be reduced, the sponsorship would be reduced, there are fewer teams so the central revenue would be also be reduced."

According to a franchise chief executive, the enthusiasm among sponsors for the IPL is not the same as it was in the first five years. "It is very difficult to get sponsorships. The IPL has taken a big beating. Everybody is negotiating - there is a massive decrease in sponsorship costs," the franchise CEO said. This CEO said he had been trying to close deals over the past month but the sponsors, mainly local, were not keen.

Yet, the CEO remained optimistic. "We are in advance talks with a bunch of people. [But] the market has been bad," he said. According to him, during the last meeting the IPL had with franchises in Chennai last month, they were told that a definite schedule would be announced in a few weeks. "The second-half schedule has not come in yet. People are still waiting. If somebody wants to spend big bucks would they just bet blindly? So you need a schedule to plan the stuff, budget depending on where the matches are."

The front-chest sponsorship is worth anywhere between Rs10 crore ($1.67m) to 20 crore per season. Muthoot Finance did not renew their three-year contract with Daredevils; Ultratech Cements brought to an end a long-running relationship with Royals; and Kings XI, who had two different sponsors after Emirates pulled out in 2011, is understood to have failed to find a sponsor for even one of the six advertising slots available on a team shirt.

According to the CEO the local sponsors' biggest challenge is building brand engagement when matches are set to be held overseas. "Say some of my home matches are being played outside due to the clash of the elections, my sponsor today is not sure whether he wants to advertise outside. It is not about the TV logo anymore. It is also about activating in the local market," he said. "This is becoming ridiculous. I hope they release the [final] schedule."

Brand experts agree it is going to be a gruelling summer for franchises with an estimated minimum cut of 20% in the sponsorship costs. "That is a serious cut. Moreover there will also be impact on the gate revenues with the first phase being played overseas. It is going to be a tough year," said Vinit Karnik, a top official at GroupM ESP, media planning agency.

Karnik said had predicted a year ago that sponsorship costs were likely to go down, and not because of the scheduling issues. "This is a peculiar year. When IPL started in 2008 most of the franchises had inked three-year deals and some had signed five-year contracts with sponsors. Most of the big deals were for three years, which got renewed for another three years and re-opened in the seventh year. The five-year deals were extended by a year. So the seventh year [2014] was the year of a lot of supply, where most of the franchises' deals were up for renewal. It is a typical demand-supply situation. If there are eight teams and there are on an average six to eight assets [sponsors] it means about 50-60 assets open in the market."

Nagraj Gollapudi is an assistant editor at ESPNcricinfo

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Posted by   on (April 4, 2014, 18:25 GMT)

Bangladesh could have been a better option than UAE for the 1st phase of the tournament. Bangladeshi spectators are enthusiastic viewers. Product markets are of same nature in Bangladesh and India. Transportation also could be quicker and cheaper in Bangladesh than to UAE.

Posted by   on (April 3, 2014, 11:53 GMT)

This article written to favour franchise to show loss in this year. Actually for sponsors are feeling the amount was increased by franchise to give the reason for reduced gate collection & travelling cost of cricketers from India to UAE.

Actually travelling cost has come down heavily due to matches played at UAE. cost of Delhi player visiting Chennai for a match cost equal to Chennai to UAE. 20Matches played in UAE. Travelling cost is almost 5% compare to cost in India.

In stadia advertisement will be other revenue which is on increasing only if it is in India or Abroad same. All our franchise owners are smart people.

Posted by BK07 on (April 3, 2014, 8:11 GMT)

Don't know why BCCI not taking any step to help Nepal and building some Internation Stadium there with the joint effort from Nepal Government. It will help India too and being neighbour too, Nepal will be best South Asian Neutral ground as Nepal has good relation with all countries. And India can take advantage in this type of situation. And Nepal has great cricket fans too and easy transit to all Asian Countires so their will not be problem for income and revene of IPL or others ICC or ACC series.... "BK"

Posted by muzika_tchaikovskogo on (April 3, 2014, 6:36 GMT)

Its part of the cyclical trend- effects of the economic slowdown if you may.

Posted by drfarnsworth on (April 3, 2014, 4:57 GMT)

Too much IPL news. I don't care how successful it is, or if it is here to stay. A domestic tournament should not get this much coverage or cause international series to be rescheduled, or even have this much money thrown around for it.

Posted by soumyas on (April 3, 2014, 4:56 GMT)

It is a pure business, so loses are bound to happen, since it is run by some of the smart businessmen of the country, they will bring it back in profit, after all who wnats introduction to IPL in cricketing world?

Posted by   on (April 3, 2014, 4:56 GMT)

I am really confused to comment!!!

Posted by 9ST9 on (April 3, 2014, 4:54 GMT)

@bsaswin - You are right the world is not so lucky.

Posted by   on (April 3, 2014, 4:51 GMT)

please play all match in India its fare venue in there don't make this tournament away from home this is a best entertaining games. from srilanken fan

Posted by RCB4Eva on (April 3, 2014, 4:43 GMT)

I am not really clear on why the sponsors are not keen on advertising "abroad". 99% of the audience for any IPL match is on TV anyway and for that audience, it really doesn't matter if the game is being played in the next country or in the next city or in their own city. If the sponsors come out and say "We don't want to be associated with a team and/or tournament that is considered corrupt", that is a different thing altogether. That is something I can understand. But saying "my sponsor today is not sure whether he wants to advertise outside" sounds a little ridiculous.

In any case, 99% of the stadium attendance will be Indians so the brands will have a retention factor as well as recognition, since being Indians they are aware of these brands, the market space of these brands, etc.

But having said all this, advertising is a crazy business where measuring what effect an ad has if it was shown in one way as against another is all a matter of pure guesswork and speculation.

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